Belgrade, 6 March 1997 (RFE/RL) -- The Serbian government of President Slobodan Milosevic, beset with political woes, is also lurching from one problem to the other in economic terms.

An RFE/RL correpondent in Belgrade reports that the newest point of concern for hard-pressed Serb citizens is a looming reduction in pensions and in pay rates for public employees.

Our correspondent reports that at the end of the month retired craftsmen were paid pensions which were 10 percent less than the previous month. This has led to widespread expectation that incomes will be likewise cut for other pensioners and for public health and education employees, as well as other categories of people living on the state treasury.

The mechanism for such a change was put in place at the end of last month, when the head of the Federal Bureau of Statistics altered the method of calculating average incomes. It is the average income figure which serves as the basis for determining not only pensions and other social spending but all the wages and salaries on the national public payroll. Our correspondent reports that the bureau's action was undoubtedly ordered by the Serbian government.

He says the average income was formerly worked out assuming that all the employees were paid up every month, while the new way of computing counts only the salaries that are really paid out.

The most important consequence is the following: namely that the statistical average income in December last year amounted to the equivalent of $160, while in January it was approximately $90.

This is mostly resulting from the fact that in January some 400,000 employees were not paid at all. Our correspondent reports this is nothing new, since for more then a year every third employee has not been paid on a regular basis and some 300,000 to 400,000 people have been waiting to be paid for more than three months.

What is new is that the government appears to have realized it can use the situation to contain costs through decreasing the incomes of more than two million people.

Statisticians wash their hands of the affair, repeating that they have only correctly applied the method used in developed countries. This is true, but that neglects to take account of the fact that in developed countries people are generally paid on time.

In Belgrade no one cares to answer the question of why the new method of calculation has been applied now and not two years ago, or next year. Many believe it shows that the government has been falsely optimistic about the standard of living. Even if the government is now quiet on that subject, economists are not. They are unanimous in asserting that the government has reached the verge of disaster by promising things it cannot fulfill.

Dr Zoran Popov, a research fellow at the Institute for Economics, warns that almost 20 percent of this year's Gross Domestic Product would go for pensions if people were paid all they are entitled to. Together with wages for the sectors of education, public health, the army and the police, the sum practically amounts to half of GDP.

This is unsustainable, economists say, even if this year ends the way the government projects -- and it's already clear that instead of a growth, the Serbian economy is facing decline.

To help keep the situation in hand, the government is probably going to have to decide whose salaries to cut. Is it going to reduce the incomes of a large part of its electorate, or is it going to concentrate the cuts into smaller, specific groups, including the police?